Rare Earths Discovery Won't Solve U.S.-China Tensions

As long as China's relationship to the developed world is built on competition, it will make little difference whether it maintains control over these valuable resources

Reuters

Japanese scientists say they have discovered 100 billion tons of rare earth minerals, about 1,000 times the rest of the known global supply, on the Pacific floor. The minerals, of which China is by far the world's dominant producer, are crucial for high tech consumer and military products, and thus for Japanese and U.S. security and economic well-being. China has used its near-monopoly on rare earth metals as a foreign policy tool against the more powerful Japanese and U.S. competitors, threatening, and at times executing, embargoes as a sort of ransom.

The discovery has led many observers, including the Wall Street Journaleditorial board, to predict the end of China's exploitation of rare earths exploitation. The country's leadership, they argue, will have to acknowledge that it can no longer use its near-total control over the resource as a weapon against the U.S. and Japan:

Markets provide reliable sources because the price mechanism has incredible power: The higher prices caused by restricted access to rare earths are leading to new supplies, which will in turn bring prices down again. Once again, the main loser from China's statism is China itself.

The free market has indeed led us to a new and plentiful supply of rare earth minerals, but it has inconveniently placed them about 10,000 to 20,000 feet beneath the Pacific. "A mine like this takes five to seven years to start up," Franz Meyer, a mineralogist at the University of Aachen, told German newspaper Deutche Welle. "Underwater mining can take even longer to get going."

Part of the reason it might take even longer than the usual five to seven years is that no one has ever built a deep-water rare earths mine before, no one has any idea what technology would even be necessary, and in any case no one is developing that technology. "Rare earth elements have never been obtained from these sorts of depths before. Entirely new technologies will need to be developed for the extraction," Daniel Briesemann, a natural resources expert at Commerzbank, also told the German newspaper.

Inevitably, however, as the Wall Street Journal writes, it will almost certainly be worth someone's time to develop the necessary technology and to figure out how to build a rare earths mine -- something that is extremely environmentally damaging when done above the surface, which is why the U.S. stopped mining its domestic supply -- on the ocean floor. But that will not solve the larger dynamic that is underlying China's aggressive use of its rare earths near-monopoly. China's economic interests are in line with those of the developed world -- as much as we rely on Chinese resources, manufacturing, and exports, China relies far more on first-world industrial and consumer markets. But its foreign policy interests often contradict our own (or at least that's how Chinese leadership, as well as Japanese and U.S. leadership sometimes perceives it).

There is a litany of foreign policy areas where Chinese and developed-world interests currently conflict: control of the South China Sea, territorial disputes in the Western Pacific, UN-led embargoes and sanctions of rogue states, and the extent of Chinese versus American influence in East Asia. Any one of these issues could be resolved, just as any single piece of Chinese leverage (such as the near-monopoly over rare earths) has a potential work-around. But the underlying problem is that China and the developed world (typically the U.S. and Japan, sometimes joined by South Korea, Australia, and/or European powers) see themselves as inherently at-odds with one another.

The irony is that China's economic rise, something that has benefited us greatly, proves that we do not live in a zero-sum world. But we still view our foreign policies as competitive rather than cooperative. As G. John Ikenberry argued in a recent Foreign Affairsessay, China is so reliant on a cooperative global system that it will have eventually have no choice but to support that system rather than trying to simply work around it. Incentivizing China to cooperate will mean working with it rather than against it, will require giving it reasons to reciprocate rather than retaliate. That kind of shift could take years, even generations, and whether it happens or not will have very little to do with rare earth metals.